procurement benchmarking volume 1 final

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INFRASTRUCTURE AUSTRALIA

Eciencies inMajor Project Procurement

Benchmarks for Ecient Procurement of Major Infrastructure

June 2012

VOLUME 1


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Ownership of Intellectual Property Rights in this PublicationUnless otherwise noted, copyright (and any other intellectual property rights, if any) in this publication is owned by the Commonwealth of Australia(referred to below as the Commonwealth).

Indemnity StatementInfrastructure Australia has taken due care in preparing this report. However, noting that data used for the analyses have been provided by thirdparties, the Commonwealth gives no warranty to the accuracy, reliability, tness for purpose, or otherwise of the information.

Published byInfrastructure AustraliaGPO Box 594 Canberra ACT 2601 AUSTRALIA

Telephone (international) +61 2 8114 1900www.infrastructureaustralia.gov.au

ISBN: 978-1-921769-77-1

(C) Commonwealth of Australia June 2012


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Contents

1 Introduction........................................................................................................................................................................................................................ 4

2 Procurement Objectives .............................................................................................................................................................................. 5

3 Benchmarks....................................................................................................................................................................................................................... 6

4 Time Benchmarks ................................................................................................................................................................................................... 7

5 Quantitative Benchmarks ....................................................................................................................................................................... 10

6 Qualitative Benchmarks ............................................................................................................................................................................ 12

7 Recommendations.............................................................................................................................................................................................. 14

Attachment 1Terminology........................................................................................................................................................................................................................... 15

Attachment 2Contract Models ........................................................................................................................................................................................................... 18

Public Private Partnership (PPP) ..................................................................................................................................................................... 19

Design and Construct (D&C) ............................................................................................................................................................................. 21

Alliance ................................................................................................................................................................................................................................... 22

Attachment 3

Schedule of Enabling Actions for Qualitative Benchmarks .............................................................. 24

Table 1: Time Benchmarks ..........................................................................................................................8

Table 2: Quantitative Benchmarks ...........................................................................................................10

Table 3: Qualitative Benchmarks ..............................................................................................................12

Figure 1: Typical PPP Structure ................................................................................................................20

Figure 2: Typical D&C Structure ...............................................................................................................21

Figure 3: Typical Alliance Structure .........................................................................................................23

Eciencies in Major Project Procurement | 3VOLUME 1


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1 Introduction

In December 2011, Infrastructure Australia initiated

a consultative study to identify those measures

which contribute to eciency in procurement of

major infrastructure projects. Infrastructure Australia

engaged Everything Infrastructure to develop, facili-

tate and document the study. The terms of reference

of the study were to:

engage key Australian stakeholders to

contribute to the study;

review the contributions against international

experience;

direct the study at the Public Private

Partnership (PPP), Design and Construct (D&C)

and Alliance contract delivery models;

not specically address business case, needs

analysis, contract packaging and/or contract

model selection, on the basis that these

activities are undertaken separately to the

procurement processes (which are the subject

of this study); and

identify benchmarks for best practice in major

infrastructure procurement.

This Volume of the Report identies the eciency

benchmarks for best practice procurement derived

from the consultation and analysis. Volume Two of

the Report, Efciencies in Procurement of Major

Infrastructure Consultation Outcomes Report, docu-

ments the outcomes of the consultative process, the

subsequent analysis and the review of contributions.

There is some variability (between the various

Australian jurisdictions) in the use of terminology

in respect of major infrastructure procurement

across the various Australian jurisdictions. Particular

terminology used for the purposes of this study is

included inAttachment 1.

The terms of reference for the study identied three

contract models:

Public Private Partnership (PPP);

Design and Construct (D&C); and Alliance.

The contract models are more particularly described

inAttachment 2.

A fundamental characteristic of major infrastructure

is the signicant costs, eort and business impact to

potential proponents and proponents to participate

in the procurement process. The key objective of

the benchmarking in this paper is to consider those

costs and impacts in the context of delivery of the

procurement objectives.

| Eciencies in Major Project Procurement4 VOLUME 1


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2 Procurement Objectives

In simple terms, the overall objective of major

infrastructure project procurement is to execute a

contract with a proponent which satises the project

requirements and is most likely to deliver best value,

while utilising processes which comply with relevant

policy. Eciency in procurement seeks to optimise

the balance between the various inputs and the

certainty of delivery of project outcomes. The pro-

ponents eort and incurred costs thus are balanced

against the benets to the sponsor (for example, the

relevant Government Agency).

To deliver eciency in procurement, further particular

objectives have been identied. The particular e-

ciency objectives are that the procurement process:

enables potential proponents to eectively

engage and participate in the procurement

process;

reasonably minimises the eort required of

potential proponents to participate in the

procurement process;

optimises the eort of the sponsor agencyand other agencies to support the procure-

ment process;

optimises the potential for proponents to

develop and submit proposals which are most

likely to deliver best value; and

captures the value of the selected proposal in

the contract with the successful proponent.



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3 Benchmarks

In respect of the above ecient procurement

process objectives, benchmarks have been identi-

ed (in consultation with infrastructure industry

stakeholders) which represent best practice. The

benchmarks consist of:

time benchmarks;

quantitative benchmarks; and

qualitative benchmarks.

The time benchmarks identied in this paper

represent prescribed durations which provide theappropriate opportunity stakeholders to undertake

particular functions while not causing unneces-

sary delay (and extra costs) to other stakeholders,

particularly to proponents or potential proponents.

Time benchmarks are readily identied and readily

measured. The time benchmarks are detailed in

Section 4 of this paper.

The consultative process relating to quantitative

benchmarks involved the identication of numerical

targets, generally involving event frequencies, event

precedents and proponent costs. Event frequency

and precedent quantitative benchmarks are detailedin Section 5 of this paper.

In the case of proponent costs, the uncertainty

of cost data, variations in method of measure -

ment and the dierences in project circumstances

signicantly limit the ecacy of numerous proponent

cost comparisons and benchmarking in the context

of this study. Consequently, proponent costs are

expressed in qualitative terms and are consequently

included in the collection of qualitative benchmarks.

The qualitative benchmarks in this paper are

somewhat more subjective in measurement than the

time benchmarks and quantitative benchmarks. The

qualitative benchmarks generally consist of outcomestatements, frequently relating to the character of an

activity (such as the suciency of communication,

the sensible minimisation of costs and eort or the

completeness of planning). In the absence of abso-

lute comparable measurements in respect of the

qualitative benchmarks, various key process inputs,

in the form of enabling actions, have been developed

to assist assessment and improvement of these

qualitative aspects of the procurement process. The

qualitative benchmarks are detailed in Section 6 of

this paper and the Schedules of Enabling Actions are

included inAttachment 3.



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4 Time Benchmarks

The time benchmarks are expressed as a range in

response to the dierences between more complex

and less complex major infrastructure projects. For

the purpose of the time benchmarks:

more complex means a project value in

excess of $1000M for D&C or over $2000M for

PPP, generally requiring multiple participants

and frequently incorporating specialist skills

and/or involving international participants; and

less complex means a project value in the

order of $200M for D&C or Alliance or $1000Mfor PPP, with the necessary skills and capa-

bility generally within single entity capability

for Alliance and D&C and/or not particularly

requiring international specialist participation.

It was recognised that PPP projects valued at

$2000M to $5000M are unique and require the

development of particular market engagement and

procurement processes in response to the specic

Project circumstances.

The time benchmarks are listed in Table 1 overleaf.



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Table 1: Time Benchmarks

Procurement

Phase

Benchmark

Event Measure

Time Benchmarks (weeks or months)

D&C PPP Alliance

More

Complex

Less

Complex

More

Complex

Less

Complex

More

Complex

Less

Complex

Procurement

Phase

Initial advance

notice of project

and market

engagement.

Months before

issue of EOI12 6 24 9 12 6

Commence the

market interaction

with specic

notice of likely

scope, value,

roles, contract

models andpackaging.

Months before

issue of EOI6 2 12 6 6 2

Formal discus-

sions, specic

project details

advised in terms

of scope, contract

models, risk,

value, turnover,

roles, timing,

Agency objectives.

Months before

issue of EOI2 2 3 3 2 2

EOI Phase EOI preparation

Weeks from

release of EOI

document to

submission ofEOI responses.

6* 4* 8* 6* 4* 3*

Evaluation of EOI

responses

Weeks

duration3 3 4 3 3 3

Alignment

sessions and

evaluation

workshops

Weeks

durationN/A N/A N/A N/A 4 3

Approval of evalu-

ation outcomes

Weeks from

completion of

evaluation to

announcement

of selectedrespondents.

1 1 2 2 1 1

Issue of Request

for Price (RFP)

documents.

Weeks after

announcement

of EOI evalua-

tion outcomes.

4 2 4 2 4 2

Note: * assumes effective engagement during Pre-Procurement Phase.

** maximum 34 weeks for unique complex PPP and subject to specic market feedback at the Pre-

Procurement Phase.



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Procurement

Phase

Benchmark

Event Measure

Time Benchmarks (weeks or months)

D&C PPP Alliance

More

Complex

Less

Complex

More

Complex

Less

Complex

More

Complex

Less

Complex

RFP PhaseDuration RFP

period

Weeks from

issue of RFP

documents to

submission of

proposals.

12 to 16 8 to 12 24** 18** 12 8

Duration of inter-

active process.

Weeks from

issue of RFP.8 4 20 10 6 4

Latest time for

material changes

(time, cost, risk)

issued in addenda.

Weeks before

RFP close. 6 6 12 12 4 4

Latest time for

minor changes

(clarication

without material

impacts) issued in

addenda.

Weeks before

RFP close.4 4 9 8 2 2

Latest issue of

marked up project

documents to

proponents

following specic

early proponentsubmissions (i.e.

Deed) during the

RFP preparation.

Weeks before

RFP close.6 6 12 12 2 2

Evaluation /

Finalisation

Phase

Earliest technical

submissions

Weeks before

RFP close.4 2 8 4 3 1

Duration of

evaluation

Weeks from

submission

close to

selection.

6 4 12 8 4 2

Duration ofnalisation

Weeks (selec-

tion to nal

documentation)assuming all

material issues

are resolved.

3 3 4 4 3 3

Approval durationWeeks

duration2 2 2 2 2 2

Approval to

nancial close

Weeks

durationN/A N/A 10 6 N/A N/A



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5 Quantitative Benchmarks

The quantitative benchmarks are expressed as a

target frequency (or quantity) of the occurrence of

particular events or as precedent events. The quanti-

tative benchmarks are listed on Table 2 below.

Table 2: Quantitative Benchmarks

Benchmark Event Benchmark Precedent Benchmark Frequency/Quantity

Divergences of planned procurement

program from the time benchmarks in

Table 1

Nil, except as specically changed in

response to market feedback.

Completion of full procurement plan

(see section 6 for more details of full

procurement plan)

Prior to announcing EOI invitations.

Divergences of actual procurement

program from planned procurement

program


response to market feedback or from

market issues outside the Agencys control.

EOI response requirements for informa-

tion relating to the project solution

Nil, except as specically required in

relation to o the shelf items or specic

interface issues.

Divergences from the information

provided (during pre-procurement, EOI

or RFP Phases) to potential proponents

or proponents


response to market feedback or form

market issues outside the Agencys control.

Planned addenda for changes or for the

issue of missing information during RFP

Phase

Nil

Material changes to contract terms or

scope during the RFP Phase

Nil

Number of proponents selected from

the EOI process to participate in the RFP

process

2 for Alliance.

Preferably 2 for PPP.

No more than 3 for PPP or D&C.



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Benchmark Event Benchmark Precedent Benchmark Frequency/Quantity

RFP evaluation methodology complete Prior to RFP document issue.

RFP evaluation plan complete Prior to Proposal submission.

Number of proponents required to fully

document their proposals during the

Evaluation/Finalisation Phase

Preferably 1, but no more than 2.

Physical, contractual and agency

interfaces resolvedPrior to RFP document issue.

Commitment of proponents to RFP

rules, including condentiality, probity

and reliance on information

Prior to issue of RFP documents to

proponent.

RFP requirements for project plans

in excess of that which is specically

required to address material Agency

risks

Nil

RFP requirements for design in excess

of that which represents material risk to

the Agency

Nil



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6 Qualitative Benchmarks

The qualitative benchmarks with supporting

descriptions are listed on Table 3 below. Enabling

actions which contribute to achievement of the

qualitative benchmarks are detailed inAttachment

3. Timing requirements in respect of the delivery of

the qualitative benchmarks are included in the time

benchmarks in Section 4 of this paper.

Table 3: Qualitative Benchmarks

Procurement Phase Qualitative Benchmark Benchmark Description

Pre-Procurement PhaseCommunication of accurate and suf-

cient Project Information.

The communication fully informs potential

Participants decisions and undertake plan-

ning in the Pre-Procurement Phase.

Comprehensive procurement planning is

undertaken.

Procurement planning fully addresses:

the project scope and commercial

arrangements;

the procurement process;

procurement resources;

procurement risks and opportunities; stakeholder interfaces; and

alignment with market capability and

capacity.

EOI Phase Clear and complete EOI documentation.

The EOI documents fully address:

Project requirements;

Response requirements;

Procurement process;

issues aecting Responses; and

Response evaluation.

EOI requirements reasonably minimise

respondents eort and cost.

The EOI response requirements focus on:

existing prequalication material

predetermined minimum standards of

experience and expertise;

Proponents internal standard documen-

tation; and

only key dierentiating information.

EOI process is undertaken in accor-

dance with information issued.

The EOI process has nil divergences from

issued information, except as specically

changed in response to market feedback

or form market issues outside the Agencys

control (as identied in quantitative

benchmarks).



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Procurement Phase Qualitative Benchmark Benchmark Description

RFP Phase Clear and complete RFP documentation.

The RFP documents require proponents to

submit:

only essential design elements whichrepresent material risks to the Agency;

only essential statements of systems or

methods (project plans) which represent

material risks to the Agency;

Responses structured to facilitate

incorporation of proposal features into a

Contract; and

documentation only of essential

Contract elements.

Commercial Terms represent value for

money.

The design of the Commercial Terms

incorporate to:

precedent jurisdictional Contracts

structure and terms;

the contemporary evolution of Contractterms;

precise mechanisms to deal with known

uncertainties;

precise and direct connection between

performance and payment; and

resolution of physical and contractual

interfaces.

RFP process is undertaken in

accordance with information issued to

proponents.

RFP process has nil divergences, (as identi-

ed in quantitative benchmarks).

Evaluation / Finalisation PhaseEective and ecient evaluation of

proposals.

The evaluation fully addresses:

assessment of the relative value of eachproposal;

resolution of material uncertainties in

respect of proposals; and

in the case of the selected proposal,

inclusion of the relative value and

the resolution of uncertainty in the

Contract.

The evaluation / nalisation process

reasonably minimises Proponents eort

and costs.

The evaluation / nalisation processes

address:

minimisation of response times;

minimisation of legal eort for (ulti-

mately) non-successful proponents;

legal eort; and

the early release or suspension of

unsuccessful proponents.

Evaluation / nalisation is undertaken in

accordance with information issued.

The evaluation / nalisation has nil

divergences, (as identied in Quantitative

Benchmarks).



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7 Recommendations

The benchmarks documented in this paper identify

those aspects of Procurement processes where

improvements in performance are expected to

provide improvements in eciency. In terms of the

priorities, it is recommended that Agencies:

adhere to the time benchmarks in planning

and execution of procurement;

adhere to the precedents and target the speci-

ed frequency/quantities in the quantitative

benchmarks;

implement guidelines relating to delivery of the

qualitative benchmarks; and

audit compliance of procurement planning and

delivery with the benchmarks.

In terms of future improvements to the benchmarks,

it is recommended that:

target limits of the extent of RFP design

requirements be further analysed;

details of standards relating to underwriting of

PPP projects be further developed; and

meaningful and reliable participant cost

benchmarks be considered, incorporating

predetermined denitions of costs and

sensible identication of the key projectparameters which aect those costs.



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Attachment 1

Terminology


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Term Description

Agency

Means the sponsor agency charged with responsibility for project

procurement and is the counterparty to the Contractor under the

Contract.

AllianceMeans the contract model of that name, more particularly

described in Attachment 2.

ContractMeans the arrangement between the Agency and the Contractor

for the Contractor to provide works and/or services.

Contract ModelsMeans Alliance, Public Private Partnership (PPP) and Design and

Construct (D&C).

D&CMeans the contract model titled Design and Construct, more

particularly described in Attachment 2.

EOI

Means the formal invitation issued to potential Contractors which

advises information related to the expression of interest (EOI)

Phase and information required in the EOI response.

EOI Phase

Means the expression of interest phase, which generally:

commences with formal notication to invite potential

Contractors to respond to the Agency in respect of a proposed

Contract for works and for services;

involves the submission of responses from potential

Contractors which seek to be selected to submit a proposal in

respect of the proposed Contract;

culminates in a number of proponents being selected to submit

proposals in respect of the proposed Contract; and

is nalised when notication and de-briengs are completed

for proponents and for the non-selected potential Contractors.

EOI response Means the response submitted by a potential Contractor pursuantto the EOI.

Evaluation/Finalisation Phase

Means:

in the case of Alliance, the evaluation and nalisation phase

which:

- commences with receipt of Proposals by the Agency;

- involves evaluation of Proposals and selection of one or

two more proponents to submit a Target Outturn Cost;

- involves resolution of commercial terms and selection of a

Contractor;

- culminates in the execution of the Contract and debrieng

proponents;

in the case of D&C and PPP, the evaluation and na lisation

phase which:- commences with receipt of proposals by the Agency;

- involves evaluation of proposals and selection of

one or more proponents to progress to full Contract

documentation;

- culminates in the execution of the Contract and debrieng

proponents; and

- is nalised when conditions precedent (if any) are satised

(including, in the case of a PPP Contract, achievement of

nancial close).



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Term Description

PPPMeans the contract model titled Public Private Partnership, more

particularly described in Attachment 2.

Pre-Procurement Phase Means the period prior to the EOI Phase.

ProcurementMeans the process of engaging a Contractor under a Contract to

perform works and/or services.

Procurement Phases

Means the:

Pre-Procurement Phase;

EOI Phase;

RFP Phase; and

Evaluation and Finalisation Phase.

Project

Means the entire project which, under the Contract, is required to

deliver the required works and/or services and/or functions, and

which may involve a number of separate Contracts.

ProponentMeans the participant or participants which submit a Proposal in

response to the RFT.

ProposalMeans the proposal submitted by a proponent pursuant to the

Request for Proposal (RFP).

RespondentMeans the participant or participants which submit an EOI

response.

RFP

Means the formal request issued to proponents which advises

information related to the RFP and Evaluation/Finalisation Phases

and which advises the information required in the proposals.

RFP Phase

means the Request for Proposal phase which: commences with notication to the Proponents of their

selection;

involves preparation of Proposals by each Proponent; and

is completed when Proposals are submitted to the Agency.



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Attachment 2

Contract Models


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Public Private Partnership (PPP)

A Public Private Partnership (PPP) contract is funda-

mentally dierent from the models described below.

Instead of contracting for the provision of a facility

which the Agency will own, the Agency contracts for

a service. The facility is used to provide the service.

Therefore, the Agencys focus is less on the techni-

cal aspects of the facility, and more on the quality of

the output that the facility provides.

The Agency species its high level requirements

for the output. The Agency then appoints the

Contractor to provide the output to meet the

specication. The Contractor designs, constructs,

commissions and operates a facility that will provide

an output to meet the specications. Often the

Contractor will engage its own separate Design and

Construct (D&C) and Operation and Maintenance

(O&M) subcontractors to deliver the facility. The

facility is transferred to the Agency after a specied

period of time for an agreed price.

The provision of the service is paramount. If there

are changes which aect the provision of the service

(which are not Force Majeure or changes made

by the Agency), the Contractor is responsible for

managing those changes at its cost. If there are

improvements in technology or eciencies, the

Contractor is incentivised to implement changes at

its own cost, to improve its performance or reduceits cost and, therefore, increase its prot margin.

The PPP structure usually involves nance provided

by a third party nancier. The nancier nances

construction of the facility. As the Agency is buying a

service from the Contractor, the Agency usually does

not make any payments to the Contractor until the

Contractor provides that service to the Agency (usu-

ally after commissioning). The funding arrangements

are set at the start of construction, which gives a

known fee as at the date of commissioning. That fee

can vary in accordance with an agreed mechanism

i.e. to take account changes in the Consumer PriceIndex (CPI) but otherwise does not vary unless the

Agency agrees.

For the provision of an asset, the Agency often pays

the Contractor on a take and/or pay or available

capacity basis. In this way, the Contractor is guar-

anteed a monthly payment during operation of the

facility, which it uses to nance repayment of its debt

and to pay its ongoing operating costs, and provide

a return to equity investors.

The transfer component of this structure can occur

shortly after commissioning (e.g. 5 years) or towards

the middle or end of the life of the facility (10 or

20 years). The timing for transfer will aect the

payment regime, either increasing the payment to

the Contractor to ensure that the debt is repaid by

the time the facility is transferred, or by requiring a

lump sum payment on transfer to cover the debt and

equity contributions that have been made to fund the

facility. Usually, there is a mixture of both of these

elements in the payment regime. If the Agency does

not require ownership of the facility at any stage, it is

not necessary to include a transfer component, and

the debt repayment is structured over the whole of

the operating period.

A performance management component is included

in the payment regime. The Contractors perfor-

mance measured in key result areas can reduce or

increase the fee that the Contractor is paid.

The structure requires the Agency to enter into

a tripartite agreement with the nanciers and

potentially direct agreement with key contractors

and suppliers of the Contractor.

Both the nanciers and the shareholders monitor

the Contractors performance to ensure that it is

entitled to receive full payment and is not breaching

the contract. Similarly, nanciers will undertake acomprehensive technical and nancial due diligence

on the project prior to advancing funds to the

Contractor necessary for the construction of the

facility. Typically, a nancier will appoint an indepen-

dent engineer to monitor performance. A reduction

in payment can aect repayment of debt and equity.

A breach of contract which leads to termination

exposes the nanciers and equity providers to the

risk of not recovering their investment. The Agency

can use these third party pressures on the Contractor

to its advantage to manage the Contractor.

A PPP is often used for a facility which is able tobe separated from the Agencys core operations,

allowing the Agency to focus on its core operations

and the quality of the output that it receives from the

facility. A PPP is also used to provide a service that

the Agency does not have expertise in providing. The

PPP structure allows the Agency to focus on whether

its requirements for the provision of a service are

being met. This diers from the structures above

where the Agency owns the facility and so monitors



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ProjectDeed

Guarantees

O&M Contract

D&CContract

DeedofCharge

Lease

Guarantees

Side DeedsSide Deeds

how a facility is being operated. The PPP structure

is commonly used by government to take advantage

of private sector innovation and eciencies and to

bring forward the provision of a service that might

otherwise be delayed due to the unavailability of

government resources.In addition, under a PPP structure the facility can,

depending on accounting treatment, be o-balance

sheet for project owners.

The PPP structure requires the nance arrange-

ments, the term and scope of the project to be

agreed and documented upfront. Whilst some

exibility can be built in, this needs to be raised and

priced in the procurement process and appropriate

provision made in the project documentation. It

should also be noted that the existence of non-

recourse debt nancing also creates signicant

unwind costs as other circumstances of contractor

default break costs will, as a minimum, need to cover

outstanding debt.The PPP project delivery structure involves

signicant procurement costs given the level of

documentation required and a longer tendering pro-

cess than the other procurement methods described

in this Attachment.

A simplied typical PPP structure is illustrated in the

diagram above.

Figure 1: Typical PPP Structure

Agency

SpecialPurpose

Vehicle

Operations andMaintenance

Contractor

D&C Contractor

Equity 1

Equity 2

Trustee

Debt 1

Debt 2

Subcontracts similar to D&C

Joint Venture Agreement



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Design and Construct (D&C)

The Design and Construct (D&C) model involves the

engagement of a Contractor to design and construct

the project, generally for a lump sum price.

A typical D&C structure is illustrated in the diagram

below.

The inherent advantage of a D&C model is that

it results in a signicant transfer of the price and

delivery risk to a third party contractor. This in turn

provides a signicant incentive for that contractor to

deliver on time and on budget.

The inherent disadvantage of the D&C model is thatit does not oer the exibility of the Alliance model

for continued design renement by the Agency dur-

ing development of the project.

In summary, the inherent advantages of a D&C

model are that:

it provides comprehensive risk transfer and

price certainty (subject, in the case of risk

transfer, to caps on contractor liability);

D&CCont

ract

Principal

D&C Contractor

Design Package

In-House

Resources

Design &

ConstructionPackage 1

Design &Construction

Package 2

Construction

Package 1


Construction

Package 2


Joint Venture Agreement(if applicable)

Figure 2: Typical D&C Structure

it drives performance outcomes to the extent

that such outcomes are dened;

it drives whole of life outcomes only to the

extent that particular standards are prescribed

and measurable;

it requires some management eort during

delivery to ensure whole of life outcomes are

delivered;

it provides single point accountability for all

site activities; and

it requires limited management burden during

delivery and commissioning.



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The disadvantages of the D&C model are that:

the project requirements (including interfaces)

must be well dened (and better dened than

under an Alliance delivery model) to enable

contractors to eectively price the works;

there must be comprehensive data to allow

design and construction risks to be priced and

managed;

changes introduced during construction can

create performance risk transfer back to the

client and may be costly to implement;

it does not directly drive whole of life outcomes

because it relies on specied standards to

provide such outcomes;

the D&C model is widely used on civil projects,including PPPs;

it does not have the same exibility as the

Alliance model to enable design development

to continue following engagement of the

contractor;

the front end procurement process generally

requires signicant tenderer design eort;

there must be capability and appetite in the

market to undertake a project of the size and

complexity; and

it may involve the parent of the owner (Agency)

providing a parent company guarantee where

the Agency is not regarded as suciently

credit-worthy on a stand alone basis in respect

of its contractual obligations under the D&C

contract. This scope of potential liability under

this guarantee may be signicant (i.e. up to the

construction cost under the D&C contract).

Alliance

An alliance is a relationship between the Agencies

and the Contractor (or Contractors) that is intended

to jointly share the risks of project delivery between

the Participants. Customarily, however, the Agency

carries full direct cost risk together with performance

incentive payment obligations. The Participants cost

risks are limited to an apportionment of margins and

unachieved delivery incentives.

Normally, alliancing is used to deliver larger, more

complex and high-risk infrastructure projects.

Projects suitable for delivery as alliances are gener-

ally characterised by one or more of the following

factors, which have been identied by the Victorian

Department of Treasury and Finance (2009):

1. the project has risks that cannot be adequatelydened or measured in the business case or

prior to tendering;

2. the cost of transferring risks is prohibitive;

3. the project needs to start as early as possible

before the risks can be fully identied and/or

project scope can be nalised, and the owner

is prepared to take the commercial risk of a

sub-optimal price outcome;

4. the owner has superior knowledge, skills,

preference and capacity to inuence or

participate in the development and deliveryof the project, including for example, in the

development of the design solution and

construction method; and

5. a collective approach to assessing and

managing risk will produce a better outcome,

for example where the preservation of safety to

the public / project is best served through the

collaborative process of an alliance.

The alliance is governed by an Alliance Board, com-

prising senior members of each participant, and an

Alliance Management Team, comprising membersof all participants selected on a best for project

basis. The Alliance Board is responsible for strategic

decisions, which must be made unanimously, giving

each participant a right of veto over any decision.

The Alliance Management Team is responsible for

the day to day management of the project. The

structure means that the Agency has a hands on

involvement in the running of the project, through

its representatives on the Alliance Board and the

Alliance Management Team. In eect, the Agency

has two distinct roles one as owner of the project



23/43

and the other as a participant in project delivery. A

failure by the Agency to recognise this and perform

accordingly can lead to substandard outcomes.

Under an Alliance, there is a no-blame culture

which means that risks are not assigned to any

participant, but are the responsibility of all. If an

issue arises, it must be resolved by all participants

and the cost consequences are essentially carried

by the Agency, with limited nancial incentives on

the other participants to perform. This is regardless

of the nature of the risk. The payment regime is used

to crystallise risks, losses and gains and distribute

them amongst all of the members of the Alliance.

An alliance has a no litigation requirement. This

means that the participants are not entitled to sue

each other for breach of contract or breach of

other obligations owed to each other. The theory

behind the no litigation requirement is that if the

participants do not have an entitlement to sue each

other, they will focus on resolving an issue on a best

for project basis. There are certain exceptions to the

no litigation requirement, being wilful default, fraud

and criminal activities.

Payment is usually on a direct cost plus margin

(overhead and prot) basis, with a pre-determined

budget used to control costs and determine

participants share of overruns or savings under the

agreements risk/reward regime. Payment is on acost incurred and not an earned value basis. The

Contractor participants performance against budget

and other key performance indicators is measured,

and alters the Contractor participants fee. For

example, a cost overrun will be shared equally

between the participants, thereby reducing the

Contractor participants fee. The Contractor will usu-

ally a require a limit on the extent of the reduction to

its fee. That limit usually equates to the Contractors

prot margin and, sometimes, its overhead margin.

The limit means that the Contractor may only recover

its costs of performance. However, beyond the limit,

cost increases are the responsibility of the Agency.

A typical alliance structure is illustrated in the

diagram below.

Figure 3: Typical Alliance Structure

Agency(as client)

Agency(as participant)

Designer

Alliance Management Team

Alliance Leadership TeamAlliance

Agreement

ConstructorSystemProvider

OperatorMaintainer



24/43

Attachment 3

Schedule of EnablingActions for QualitativeBenchmarks


25/43

Procurement

Phase

Qualitative

BenchmarkDescription Enabling Actions

Pre-Procurement

Phase

Communication

of accurate andsucient project

information.

Available to potential

proponents to makeinformed decisions

and undertake

planning in the Pre-

Procurement Phase.

Identify the specic market sectors / entities which have the

capability, capacity and appetite to be a participant in theproject.

Ensure that the relevant information is available to potential

participants, either as part of an Agency communications

program or on a project specic basis.

Communicate information that is relevant to the potential

participants, giving consideration to communicating

information relating to:

- Project objectives and key Agency issues and values;

- Project scope and value, the contract model risk

allocation, the payment regime and project programme

including term, if relevant;

- the procurement process and procurement programme;

- intergovernment issues and Agency retained

responsibilities;- approach to related entities;

- Agency governance and approvals processes;

- interfaces denition and obligations;

- planning approvals status and strategy;

- approach to contribution to bid costs;

- consistency of processes, risks and terms within a

jurisdiction and similar model projects;

- expected prequalication levels or minimum capability/

capacity hurdles.

Ensure properly considered planning underpins all

undertakings.

Develop, implement, review and improve the communica-

tions strategy.

Ensure the accuracy and reliability of information issued.

Ensure relevant Agency and intergovernment approvals are

in place in relation to the content of information provided.

Consider the importance and relevance of information in the

context of each Procurement Phase.

Ensure that the communicated strategy is delivered.

Prepare, resource, manage and fund the planning and com-

munication processes.

Ensure Government agencies are aligned in respect of the

project issues.

Obtain all necessary Government approvals and endorse-

ments to the Procurement process.

Ensure that any changes to program and process are

communicated as early as practicable and as accurately as

possible.



26/43

Procurement

Phase

Qualitative


Pre-Procurement

Phase

Comprehensive pro-

curement planning isundertaken.

Planning fully

addresses: the project scope

and commercial

arrangements;

the procurement

process;

procurement

resources;

procurement

risks and

opportunities;

stakeholder

interfaces; and

alignment with

market capabilityand capacity.

Identify requirements for Agency and Ministerial approvals

and incorporate in procurement planning. In dening the project requirements, consider and evaluate

the consequences of project complexity including consid-

eration of:

- the number of separate participants;

- the diversity of participants;

- the relationship between the participants and the

structure of the proponent; and

- the role of participants in the performance of the

Contract services over the life of the Contract.

Ensure that the procurement process is appropriately

understood, endorsed and approved within the Agency and

within wider Government (as required).

Understand the market issues aecting procurement,

including diversity in Proponent teams, and align theprocurement strategy with market capacity, capability and

appetite.

Consider the costs of bidding, including considering bid

cost contribution where it is warranted.

Implement processes to capture lessons learned from

similar projects and from the Procurement Phases, and to

implement continuous improvement.

Implement processes to capture Government and market/

industry knowledge.

Incorporate management of State retained obligations and

State interfaces, including implementation of a strategy to

resolve intergovernmental issues and provide for Agency

relationship management.

Ensure access to (and commitment from) appropriateGovernment resources throughout the Procurement

processes.

Provide particular planning for the level of Agency resources

necessary for Alliance procurement and delivery.

Provide a consistency of approach within the jurisdiction

and incorporate jurisdiction procedures, including gateway

processes.

Develop comprehensive planning for each Procurement

Phase and ensure planning for each subsequent phase is

complete prior to commencement of that phase.

Incorporate sound analysis of the project needs and busi-

ness case.

Identify appropriate resources and necessary capability of

the procurement team with clear responsibilities within eachProcurement Phase.

Develop robust procurement baseline budgets and

programmes.

Address contract packaging and contract models in the

procurement planning.

Incorporate overall risk and opportunity management

throughout all Procurement Phases.

Seeking and respond to feedback from within the sponsor

Agency, from potential Proponents and from stakeholders

(including central Agencies);



27/43

Procurement

Phase

Qualitative


Pre-Procurement

Phase

Comprehensive pro-


Planning fully


and commercial

arrangements;

the procurement

process;

procurement

resources;

procurement

risks and

opportunities;

stakeholder

interfaces; and

alignment with


Provide detailed programming at each Procurement Phase

recognising that Proponents:- often consist of separate participants, each with review /

approval protocols;

- require reasonable time to resolve inter-participant

issues;

- require sucient time (and information) to plan and

commit resources; and

- incur costs for holding and delays.

Provide a strategy to resolve planning approvals, including

addressing responsibilities, allocation, commercial conse-

quences and management plans.

Provide a strategy to resolve land access.

Identify and resolve a statutory approvals strategy.

Provide a strategy to resolve Project third-party interfaces. Understand the cost impact and consequences of risk

allocation and provide a strategy to resolve risk allocation.

Incorporate a clear and focused communications strategy

with all relevant stakeholders;

Ensure that the overall procurement strategy is suciently

developed to ensure consistency throughout all subsequent

Procurement Phases.

Develop a comprehensive understanding of the skills

required throughout procurement (including throughout

each phase).

Ensure team leadership is experienced in the planned

contract models.

Ensure team leadership is experienced in the particular

services and/or infrastructure types contemplated in theproject and, if required, supplement the leadership with

expert mentors.

Ensure experienced leadership support (steering

committee).

Ensure appropriate talent and capability for appropriate

activities and consider independent experts for particular

project issues and tasks.

Ensure eective relationship and process management

within Government.

Ensure process experience and capability in the procure -

ment team.

Ensure issue resolution capability in the procurement team.

Ensure timely operator participation in the procurement

processes.

Ensure appropriate budgets are identied and approved for

the procurement processes.

Facilitate whole of Government alignment and support.

Provide expertise to optimise eectiveness of bidder

interaction.

Ensure strong project/program management capability in

the procurement team.

Ensure clear responsibilities and accountabilities within the

procurement team.



28/43

Procurement

Phase

Qualitative


Pre-Procurement

Phase

Comprehensive pro-


Planning fully


and commercial

arrangements;

the procurement

process;

procurement

resources;

procurement

risks and

opportunities;

stakeholder

interfaces; and

alignment with


Ensure that the Procurement team understands the appetite,

capability and capacity of the potential participants todeliver each part of the project scope, including considering:

- a structured early market engagement and sounding;

- communications between agencies and jurisdictions to

obtain benets of experience and lessons learned; and

- advice to the procurement team from potential

proponents;

Ensure that the procurement team understands (and the

procurement planning responds to) the full scope of the

project and the specic project and procurement risks and

opportunities.

Ensure that the procurement is designed to best align the

project requirements with the market characteristics, given

consideration to:

- capacity, capability and appetite of potential proponents;- the impact of project complexity, bundling on competi-

tion and value;

- the impact of project size (value) on competition;

- the reduced eciency of joint ventures relative to a

single suitable participant;

- the value/benets/cost of project risk allocation;

- the cost of bidding and the eect of the number of bid-

ders on Proponents appetite;

- uniformity in approach within jurisdictions;

- the diversity and tensions within bid teams; and

- reasonable procurement programming, including

responding to other concurrent projects, international

participation and the like. Establish a Procurement risk and opportunity management

process.

Ensure early resolution of project physical and contractual

interfaces.

Ensure early resolution of interagency issues.

Ensure ongoing alignment of Government agencies in

respect of issues.

Ensure commitment of Government resources.

Finalise procurement approval processes.

Implement eective interagency communications.

Clarify and agree interagency protocols.

Establish transparent milestones and monitor progress to

program for Procurement activities.

Engage early intervention and/or implement remedial action

to mitigate the impact of events or circumstances which

aect procurement.

Ensure clear understanding within Government of the project

risks, including those related to Agency and Government

retained obligations.

Ensure early recognition and response to probity issues.



29/43

Procurement

Phase

Qualitative


EOI Phase Clear and complete

EOI documentation.

The EOI document

fully addresses: Project

requirements;

Response

requirements;

Procurement

process;

issues aecting

responses; and

Response

evaluation.

Ensure that the EOI documents describe:

- the EOI processes;

- the issues which have the potential to materially aect

the EOI process or the Procurement process;

- details of the EOI process and its context within the


- the EOI Stage program and the procurement program;

- the EOI evaluation methodology, criteria and any weight-

ings which may apply;

- the constraints, procedures and protocols for

proponents to comply with throughout the procurement

process, including probity obligations;

- approach to related entities;

- Agency governance and approvals processes;

- approach to contribution to bid costs; and

- expected prequalication levels or minimum capability/

capacity hurdles.

Ensure that the EOI response requirements include identi-

cation and commitment of the proponent (and participants)

to the RFP rules including commitment to submit a proposal,

probity condentiality, conict of interest and related

company procedures.

Ensure that the EOI documents include details which enable

participants to understand the project with consideration

being given to:

- Project objectives and key Agency issues and values;

- all issues which have potential to aect the project;

- Project scope and value, the contract model risk

allocation, the payment regime and Project programmeincluding term, if relevant;

- intergovernment issues and Agency retained

responsibilities;

- interfaces denition and obligations;

- planning approvals status and strategy;

- consistency of risks and terms within a jurisdiction and

similar model projects; and

- any limits on innovation.

Ensure that the evaluation criteria align with the project

objectives.

Ensure that the information required aligns with the evalua-

tion criteria.

Ensure that the evaluation methodology measures the extent

to which the EOI response information satises the relevant

evaluation criteria.

Ensure that the EOI responses are evaluated in accordance

with the advised evaluation criteria and methodology.



30/43

Procurement

Phase

Qualitative


EOI Phase EOI requirements

reasonably minimiseRespondents eort

and cost.

The EOI Response

requirements forlarger:

existing prequali-

cation material

minimum levels of

experience and

expertise;

Proponents

internal standard

documentation;

and

only key

dierentiating

information.

Develop the EOI process program to allow reasonable time

for the activities while avoiding unnecessary holding/stand-ing costs for participants.

Utilise the Pre-Procurement Phase feedback from potential

participants to inform the development of the EOI program.

As far as practicable, reduce EOI response eort giving

consideration to:

- the use of existing relevant prequalication arrange-

ments for relevant participants, (including the application

of corporate management and corporate capability and

performance) recognising that this may not be appropri-

ate for particular services or where new participants are

contemplated;

- the utilisation of minimum experience, capability and

capacity measures to mandate standards for relevant

participation because this will guide the acceptable

potential participants while discouraging unacceptableparties from seeking to participate;

- requesting only dierentiating information and clearly

dening the information requirements;

- allocating specic criteria to specic returnable

schedules;

- requiring detailed participant business sustainability

information (such as nancial reports) to be in the form in

which it was originally produced;

- focussing the EOI response requirements on the

character / capability / commitment / interrelationships

of participants to the Respondent; and

- avoiding the inclusion of works or service solution,

unless product issues aect evaluation.

As far as practicable, simplify the EOI requirements andminimise documentation including considering:

- maximising application of electronic submissions;

- incorporating page limits on EOI Response specic

documents; and

- sensibly requiring schedules and point form summaries

rather than text.



31/43

Procurement

Phase

Qualitative


EOI Phase EOI process is under-

taken in accordancewith information

issued.

The EOI

process has nodivergences as iden-

tied in Quantitative

Benchmarks.

Ensure the early undertaking of actions to resolve issues

which have the potential to delay or alter the EOI process. Ensure that the Agency resources manages, coordinates

and delivers the EOI process as planned, as previously

advised and as contemplated in the EOI documents.

To the extent that changes to the EOI program or to the

EOI process become unavoidable, advise the potential

participants as soon as possible.

Ensure the accuracy and completeness of advice to poten -

tial participants during the EOI Phase.

Ensure that the Agency resources, manages coordinates,

undertakes and concludes the EOI evaluation in the

minimum reasonable time.

In the case of Alliances, ensure that the procurement team

has the expertise, support and availability to undertake the

alignment/selection workshops.

Evaluate the EOIs within the time advised in the prior

information, the EOI Phase program and the EOI documents.

Ensure the approval processes and announcement proto-

cols are conrmed, planned and followed.

Ensure that the procurement team recognises the

waiting/holding costs for participants after EOI response

submission.



32/43

Procurement

Phase

Qualitative


RFP Phase Clear and complete

RFP documentation

The RFP documents


requirements;

Proposal

requirements;

Procurement

process;

issues aecting

proposals; and

Proposal

evaluation.

Ensure that the RFP documents clearly address all material

aspects of the Project including:- the commercial terms, including the precise allocation of

risk, payment terms, parties rights and remedies;

- the structure and character of the Contract;

- works and service requirements, including mechanisms

for measurement of compliance;

- details of issues aecting the performance of works and

services (including land access, works approvals and

interfaces); and

- clear denition of any limitations on exibility and/or

innovation.

- Ensure that RFP documents clearly dene what is

required to be submitted in the Proposal including:

- clarity in the extent of detail, certainty and commitment

of the various aspects of the Proposal; and

- clear identication of mandatory requirements.

For complex, major and/or unique Projects, engage in a

planned and controlled interactive process between the

Agency and Proponents during Proposal preparation to

enable:

- clarity and delivery certainty in relation to government

retained obligations;

- Proponents to test opportunities for innovation (or limits

to innovation) and to optimise proposal team eort;

- Proponents to raise issues without committing to formal

clarication; and/or

- the Agency to dene limits and consider clarications in

an informed context.

Where interactive RFP processes are employed, Agencies

should consider:

- establishing subject matter streams for interactive ses -

sions to ensure appropriate Agency representation and

to enable ecient targeted interaction;

- establishing protocols which enable the interactive pro-

cess to be eective within sensible probity constraints;

- process management to provide equal opportunity to

proponents and to preserve the Proponents intellectual

property;

- the engagement of skilled experienced representatives

to manage the Agency roles; and

- appropriately skilled Agency / Government representa-

tives participation in the relevant subject mattermeetings.



33/43

Procurement

Phase

Qualitative


RFP Phase Clear and complete

RFP documentation

The RFP documents


requirements;

Proposal

requirements;

Procurement

process;

issues aecting

proposals; and

Proposal

evaluation.

Include details of the evaluation methodology in the RFP

document incl uding (where applicable):- clarity of mandatory requirements;

- clarity in respect of the assessment of value for money;

- identication of issues relating to price point, aord-

ability and/or the relevance of the PSC;

- the circumstances which would justify adjustments to

the PSC value (for PPPs);

- the mechanism and application of comparative quantita-

tive risk assessment;

- the mechanism and value of relative economic benets;

- clear evaluation benchmarks (including discount rates,

economic benet costs/benets and whole of life costs);

- mechanisms to deal with options, alternatives and

innovation (including ranked preferred options up to avalue (PV) cap, if nominated);

- clear and unambiguous evaluation criteria;

- application of (and relationship between) relative value,

non-price, economic and/or outturn cost analyses; and

- weightings of non-price assessments if used.

RFP Phase RFP requirements

reasonably minimise

Proponents eort and

costs.

The RFP requires:

only essential

design elements

which represent

material risks to

the agency;

only essential

statements of

intent (project

plans) which

represent material

risks;

Responses struc-

tured to facilitate

incorporation of

Proposal features

into a Contract;

and

documentation

only of essential

Contract

elements.

Proposal requirements should be focussed on that which

has a material impact on the certainty of delivery of the

project objectives, including information which:

- is characteristic of the proponent (and will be inevitably

captured by the engagement of that proponent in a

Contract); or

- represents relative value; or

- represents value to the Agency and therefore shouldbe captured in a Contract with that proponent (if

successful).

Proposal technical requirements should be minimised where

practicable, including considering:

- elimination of documentation relating to Contractors

corporate systems (i.e. management, safety and environ-

ment), which most likely have been directly or indirectly

dealt with in the EOI Phase;

- limitation of project specic method statements (project

plans) to those which are genuinely material to delivery

of the project objectives; and

- limitation of design documents to those which capture

the relative value of the Proposal including those which

are necessary for assurance of functional certainty and

aesthetics.

When considering proposal design, delivery and service

documentation requirements, Agencies should recognise

that:

- documentation should be limited to that which provides

certainty of outcomes; and

- to the extent that elements of the successful proponent

represent greater relative value or outcome certainty,

then those elements should be incorporated in the

Contract.

The Procurement team should sensibly limit option pricing.



34/43

Procurement

Phase

Qualitative



reasonably minimiseProponents eort and

costs.

The RFP requires:

only essentialdesign elements

which represent

material risks to

the agency;

only essential

statements of

intent (project

plans) which

represent material

risks;

Responses struc-

tured to facilitate

incorporation of

Proposal features

into a Contract;

and

documentation

only of essential

Contract

elements.

The Procurement team should be aware that a certain

level of design and delivery development by Proponentsis unavoidable to establish certainty of pricing (in PPP and

D&C projects) during the RFP Phase and, consequently, the

requirement to incorporate that level of design and delivery

documentation in the proposal frequently has limited mate-

rial impact on costs.

As a minimum, technical documentation should include

those documents necessary to provide functional, aesthetic

and whole-of-life certainty.

Agencies should consider receipt of technical aspects of

(D&C and PPP) Proposals prior to the closing date and time

to reduce the evaluation period and reduce the standby time

for proponents technical resources.

To facilitate evaluation of the various aspects of proposals,

proposal requirements are structured to provide alignment

between:

- the required content of a specic returnable schedule;

- the specic evaluation criteria for that returnable

schedule;

- the particular expertise of the Agency group engaged to

evaluate that returnable schedule; and

- the methodology for evaluation of that returnable

schedule.

To facilitate early and complete resolution of issues and

evaluations, the Agency should:

- concurrently plan, program and manage concurrent

evaluation;

- centralise issue identication, management and resolu-

tion; and

- ensure that the form of the issue resolution is able to be

incorporated into the proposed Contract.

To facilitate consolidated evaluation of all aspects of propos-

als, the RFP generally (and the evaluation plan specically)

describes how the evaluation of each proposal element

(returnable schedule) contributes to the overall evaluation of

the proposal.

To facilitate the later Contract nalisation and to readily

capture the relative value of the selected proposal, the RFP

is structured so that key aspects of the selected proposal

(particularly those which contribute to that proposals

relative value) are able to be incorporated into the proposed

Contract.

To the extent practicable, hardcopy requirements should be

minimised and electronic submissions should be employed.

To the extent practicable, the structure and content of

proposals should be consistent with similar projects within

the jurisdiction.

Proposal documentation requirements should be limited to

that which has material impact on the certainty of delivery of

the project objectives.



35/43

Procurement

Phase

Qualitative




costs.

The RFP requires:


which represent

material risks to

the agency;

only essential

statements of

intent (project

plans) which

represent material

risks;

Responses struc-

tured to facilitate

incorporation of

Proposal features

into a Contract;

and

documentation

only of essential

Contract

elements.

Where appropriate, a contribution to bid costs should be

considered in response to large and/or complex projectsrequiring signicant unique eort.

If consideration is to be made in respect of bid costs, those

considerations should be:

- only in respect of unsuccessful proponents;

- limited to a xed, predetermined amount;

- subject to demonstrated third party expenses exceeding

that xed amount; and

- subject to submission of a bona de proposal.

Ensure that procurement team resources are authorised,

experienced and available to eectively respond to:

- the interactive and clarication processes in PPP models

and in D&C models (including early contractor involve -

ment); and

- the engagement for Alliance participation in TOC

preparation.

Fully documented commercial terms are necessary to

provide certainty in respect of Proposal evaluation and in

terms of Contract nalisation (for D&C and PPP Contracts).

Fully documented commercial terms for options and alterna-

tives are necessary to provide certainty (in respect of the

known variables) for the purpose of evaluation of Proposals

and for the purpose of Contract nalisation (for D&C and

PPP Contracts).

The Procurement team should recognise that the PPP

Contracts invariably involve a suite of commercial/nancial

documents at Contract Close due to the necessity to identify

the relationships between the various participants, the

Agency and (possibly) the government. In the context of

minimising the Proponents eort and costs, it is prudent to

consider the character and completeness of the commercial

documentation required as part of the Proposal, including

considering:

- the use of precedent documents;

- the use of term sheets where sucient certainty can be

achieved, such that the resolution of outstanding issues

will not result in adverse changes to the commercial

terms (in the Contract documents) during nalisation; or

- deferring nalisation of non-material documents with

only a selected proponent while other proponents are

held in reserve.

The Procurement team should recognise the inherent

uncertainty associated with validity periods which are less

than the duration of the Evaluation/Finalisation Phase andshould require adequate realistic validity periods together

with refresh protocols for extending the validity.



36/43

Procurement

Phase

Qualitative




costs.

The RFP requires:


which represent

material risks to

the agency;

only essential

statements of

intent (project

plans) which

represent material

risks;

Responses struc-

tured to facilitate

incorporation of

Proposal features

into a Contract;

and

documentation

only of essential

Contract

elements.

Agencies should consider resolving commercial terms

(particularly PPP) with each proponent prior to the closingdate and time to reduce the evaluation period and reduce

the standby time for proponents commercial / nancial

resources.

Ensure that the degree of proponent due diligence for

proposal submission is to be appropriate for the project in

understanding that:

- incomplete due diligence results in uncertainty in the

value of a Proposal and in terms of commercial and

procurement program outcomes;

- completed due diligence at submission provides

certainty of the Proposal, however it requires proponents

to expend greater eort and cost; and

- Proponents may seek to delay full due diligence to

be a contract condition precedent to be resolved after

Contract execution, which could result in ongoingnegotiation following Contract award.



37/43

Procurement

Phase

Qualitative


RFP Phase Commercial Terms

represent value formoney.

Full consideration is

given to: precedent

Contracts;

evaluation of

terms;

mechanisms

to deal with

uncertainties;

performance and

payment; and

interface

resolution.

As far as practicable, commercial terms should be:

- consistent within the jurisdictions; and

- consistent with similar projects.

Where specic commercial terms are necessary to deal

with a particular issue utilise precedent documents (from

precedent projects) where practicable.

Ensure that the Agency team are informed in respect of

the evolution of terms over time in response to Agency and

participant needs.

Where particular uncertainty exists, mechanisms involving

predetermined commercial outcomes for particular events

should be considered.

The Agencys approach to commercial terms in the RFP

documents should be informed by the earlier market

sounding.

The Agency should recognise that the primary objective ofcontract terms is to drive Contractor behaviour and should

consider:

- a balance between nancial outcomes and contract

performance; and

- consistency between good performance incentives and

poor performance remedies;

The Agency should ensure that performance is linked to

payments and that payment adjustment triggers:

- are sensibly limited in number and actually and directly

reect the Agencys required outcomes;

- are readily measurable, not subjective and readily

auditable;

- are not scaled or structured so that reasonable

performance is penalised (a feature which will encourage

Proponents to provide for such adjustments in the

nancial elements of their proposal).

Recognise the cost / value of particular commercial posi-

tions including:

- the added cost of retentions;

- potential value for insurance strategies;

- the savings associated with resolution of project inter-

faces and inter government agency issues; and

- the pricing uncertainty in response to the transfer of risk

to a proponent which cannot be managed or cannot be

quantied (such as unlimited liability).

Recognise that uncertainty increases both the price of a

proposal and the proponents preparation cost.



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Procurement

Phase

Qualitative


RFP Phase RFP Process is

undertaken inaccordance with

information issued to

Proponents.

RFP process has no

divergences, as iden-tied in Quantitative

Benchmarks.

Ensure that the RFP documents describe:

- issues which have the potential to materially aect theRFP process;

- details of the RFP process and its context in the


- the RFP evaluation methodology;

- constraints, procedures and protocols to be observed

throughout the RFP Phase; and

- eective arrangements for access to information includ-

ing relevant data;

Ensure that delay and disruption and wasted eort is

avoided/minimised including:

- delivering the RFP process in accordance with the

advice to Proponents (including in the RFP document);

- ensure the accuracy and completeness of all advice toProponents;

- ensure that unavoidable changes to the RFP process are

advised as early as possible including:

requiring clarication requests to be submitted early in the

RFP period;

issuing any unavoidable material addenda early in the RFP

period; and

extending the Proposal closing date and time when material

changes are not able to be eectively addressed in the

remaining time.

Prior to the closing date ensure that the Agency is fully

prepared for the Evaluation / Finalisation Phase, including

ensuring that it has:

- developed its evaluation plan and contemplateddocumentation;

- engaged and committed the evaluation resources;

- developed and structured the evaluation team;

- inducted and trained its evaluation resources;

- nalised the evaluation program;

- established receipt security and document control

arrangements;

- implemented centralised issue (identication, coordina-

tion, clarication and resolution) management;

- obtained endorsement of the evaluation processes as

required; and

- identied and planned evaluation reporting and approval

processes.



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Procurement

Phase

Qualitative


Evaluation /

Finalisation Phase

Eective and

ecient evaluation ofProposals.

The evaluation fully

addresses: assessment of

the relative value

of each proposal;

resolution of

material uncer-

tainties in respect

of proposals; and

in the case of the

selected pro-

posal, inclusion of

the relative value

and the resolution

of uncertainty in

the Contract.

Ensure eective management of material issues (aecting

the value and/or uncertainty of Proposals) including:- coordination and centralisation of issue management

(across disciplines) to recognise the interrelationships

and materiality of issues;

- implementation of eective cohesive issue resolution

strategies;

- design of clarications requests to ensure that the

responses enable evaluation with certainty;

- design of clarications requests to provide the precise

Contract wording which would be employed to capture

the outcomes; and

- recognition of the occasional necessity to sequence

clarication requests to consider responses prior to

subsequent clarications.

Recognise that validity periods have the potential toaect proposal certainty and implement processes to

monitor, manage and refresh validity during the Evaluation/

Finalisation Phase.

Recognise that competition should be preserved until all

material aspects of Proposals are resolved, to ensure:

- minimum adverse shifts in commercial terms (deal

creep);

- minimum extended multi-party negotiations; and

- minimum delays to execution of the Contract and/or to

nancial close.

Ensure that the evaluation/nalisation plan is fully consistent

with the RFP and provides clear direction to the evaluation

team in respect of precise criteria, evaluation tools, compara-

tive measures, innovation and aesthetics measures, relative

risk assessment, the application of the PSC and the like.

Understand that certain options and alternatives may be

mutually exclusive (or result in cumulative impacts) and

evaluation nalisation should include consolidation of each

proponents proposal inclusive of the selected options.

The consolidated Contract document must accurately and

comprehensively incorporate the particular value aspects of

the proposal and the resolution of uncertainties during the

Evaluation/Finalisation Phase.



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Phase

Qualitative


Evaluation /

Finalisation Phase

The Evaluation /

Finalisation processreasonably minimises

Proponents eort and

costs.

The Evaluation

/ Finalisationaddresses:

timeliness;

legal costs and

eort; and

release or

suspension of

unsuccessful

Proponents.

Ensure the early undertaking of actions to resolve issues

which have the potential to delay or alter the Evaluation/Finalisation process.

To the extent that changes to the Evaluation/Finalisation

program or to the Evaluation/Finalisation process become

unavoidable, advise the Proponents as soon as possible.

Ensure that the Agency resources, manages coordinates,

undertakes and concludes the EOI evaluation in the

minimum reasonable time.

Evaluate the Proposals within the time advised in the prior

information, the Evaluatio

procurement benchmarking volume 1 final

Documents